Are Firing Costs Important for Business Cycles? Lessons from Bulgaria (1999-2018)
Are Firing Costs Important for Business Cycles? Lessons from Bulgaria (1999-2018)

Summary/Abstract: We introduce firing costs into a real-business-cycle setup augmented with a detailed government sector. We calibrate the model to Bulgarian data for the period following the introduction of the currency board arrangement (1999-2018). We investigate the importance of such labor market frictions for cyclical fluctuations in Bulgaria. Firing costs decrease employment volatility and pro-cyclicality, where both effects come at odds with data. Besides those, we do not find other important effects of firing costs for business cycle fluctuations in Bulgaria.

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